Quick Note: This three part series on MCA debt is designed to empower small business owners like you, to help you regain control over your future.
In this series you’ll better understand the following:
Part 1: You’ll see how MCA debt may affect your personal credit and how you can dispute errors.
Part 2: You’ll discover the hidden risks in MCA guarantees and how these hidden traps could expose your personal assets.
Part 3: You’ll be able to quickly identify MCA collection abuse, and how you can protect your rights.
Part 1: Your Personal Credit and MCA Debt: Facts to Know Now Before It's Too Late
The business you created is not just some numbers on a spreadsheet.
It’s your baby.
Your dream.
It’s your life.
You started it. You grew it into something special… and you treat your employees like family. They depend on you.
But sometimes things get tough. And sometimes you have to make tough decisions.
So, to keep your business moving forward, you bit the bullet and took out a Merchant Cash Advance (MCA). Maybe you took two, maybe you stacked three MCAs or more.
At first, the money helped. Sure. You had payroll covered. The MCAs gave you enough cash to wait on those outstanding invoices to finally be paid…
But then reality caught up.
Those daily or weekly MCA draws started eating away at your bank account. Bite by daily bite. More money was going out than coming in.
That’s when you really started to worry.
Now, you already know the hard decision to take on MCAs may have led to your business credit rating dropping…
But one question is probably keeping you up at night…
Could my MCA debt hurt my personal credit, too?
Unfortunately, yes. It can.
But you are not powerless. You do have rights.
Now, maybe you’ve heard of the Fair Credit Reporting Act.
It’s a federal law giving you certain rights when companies come to collect debts, or share and report your credit data. If you’re familiar with it, you know it has a lot to do with personal credit.
So, what does personal credit have to do with Merchant Cash Advances?
A whole lot, actually. We’ll get to that in just a minute.
First…
What Is the Fair Credit Reporting Act?
The Fair Credit Reporting Act (FCRA) is a federal law. One that’s been around a long time. In fact, the first version was signed into law in 1970.
The law sets rules for how credit data is gathered, shared, and how it’s used. But it also gives you rights to dispute when information about you is wrong. And, unfortunately, it can be wrong quite often.
Here’s some of the key things about the FCRA you should know:
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You have the right to check your credit.
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You have the right to dispute errors.
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You have the right to accurate reports.
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You have the right to privacy.
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On many negative items, you have the right to time limits.
These rights matter. And they matter a lot.
So… Back to what matters for small business owners with MCAs.
Can MCA Debt Hurt Your Personal Credit?
Unfortunately, many business owners believe an MCA does not and will not affect their personal credit.
After all, an MCA is often set up based on future business sales, not as a standard business loan or a personal loan.
With this in mind, maybe you’re thinking, “my MCA is not personally guaranteed, it’s a performance guarantee based on my business. So, I’m fine.”
Not so fast.
In part 2 of this series, we’ll show you how that performance guarantee could, in fact, turn into a personal guarantee…
Putting you, personally, at serious risk.
Get this…
Many, if not most, MCA providers will check on your personal credit before they approve an advance.
Some even ask business owners to forego the performance guarantee to sign a personal guarantee.
And some agreements may have, in the fine print, a clause that could turn that performance guarantee into a personal one.
Now, whether any of this affects your personal credit depends on the deal you signed (you’ll get the important facts on this topic in part 2)…
It depends on how everything was reported, and the facts behind it all.
What if your MCA does affect you personally?
Well, it may make it far more difficult to:
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Get a mortgage.
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Qualify for a small business loan.
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Get good interest rates on future credit.
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Reach other personal financial goals.
It’s why you must check the fine print in your MCA agreements.
Unfortunately, the last thing you need right now is another problem to solve. One that may end up being bigger than your MCA problems.
That’s why you must, absolutely must, know what’s on your credit reports (and the fine print in your MCA agreements), immediately.
Here’s What to Do Today
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Get your credit reports at AnnualCreditReport.com, an official website authorized under federal law.
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Be sure to check on all three major credit bureaus.
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Use an eagle eye looking for accounts you do not know.
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Double check for inaccurate balances, dates, or payment details.
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Highlight any outside credit inquiries you do not recognize.
Write down anything that looks wrong. If you find an error, dispute it.
The credit bureau and the company that supplied that information may have duties to investigate and correct errors under the FCRA.
Again, if you find anything that’s off, even by a little bit, dispute it. Get it fixed.
And be sure to keep copies of all your reports and any communications you sent and received.
Your business is your baby. You care about it. Now it’s time to be the same with your credit reports.
Owing Money Doesn’t Mean Giving Up Your Rights
MCA lenders do have a right to seek payment under valid agreements. You did sign a contract, after all.
But owing money does not give a lender a free pass to bully you or break the law (more on this in part 3).
Know your rights, know your credit. Know the fine print.
Feeling Trapped? You Do Have Options.
MCA debt can leave you feeling overwhelmed. And knowing there’s a possibility MCAs can affect your personal credit doesn’t help.
But you do have options.
Based on your contracts, your cash flow, and lender terms you agreed to, restructuring your MCA debt may be well worth exploring.
And it won’t take you more than a few minutes to find out.
Berkshire Financial Services, experts in the field for more than 20 years, can review your situation and discuss possible next steps to help right your ship.
Call today for a free, discreet, zero-obligation consultation.
You’ll get clear, straight to the point answers. And clear, straight to the point solutions.
Depending on your situation, you’ll quickly understand potential options we can offer you. Options that may best fit your short-term and long-term needs.
Options for true relief.
An important note: Those daily MCA draws on your account? They mean the clock is ticking.
Call us at (800) 801-1019 or book a confidential appointment.
Important: Berkshire Financial Services does not provide legal advice and is not a law firm. This article is for general information only. Results vary.